Feb 8 - Fitch Ratings views Empresas Publicas de Medellin E.S.P.'s (EPM:
foreign and local currency Issuer Default Rating of BBB) intention to divest EPM
Telecomunicaciones S.A. E.S.P. as neutral to slightly positive for EPM's credit
quality.
According to the announced none-binding memorandum of understanding signed
between EPM and Colombia Movil's major shareholder, Millicom, EPM's
telecommunication business unit would merge with an intermediate holding company
of Colombia Movil. After given effect to the transaction, the ensuing entity
would own approximately 75% of Colombia Movil and all of EPM Telecomunicaciones'
assets. EPM expects to retain a large, yet, none controlling participation in
the ensuing entity.
EPM's credit quality would be neutrally impacted as its telecommunication unit
was not considered a core business for the company. EPM's consolidated financial
profile would be unaffected, yet it's consolidated EBITDA and total debt could
marginally decrease after the transaction as the company would no longer
consolidate EPM Telecomunicaciones. As of the last twelve months (LTM) ended
Sept. 30, 2012, EPM reported a consolidated EBITDA and total debt of USD2.2
billion and USD3.9 billion, respectively. During the same period, EPM
Telecomunicaciones' EBITDA and total deb were USD171 million and USD467 million,
respectively. Fitch believes this transaction could slightly positively impact
EPM's credit quality if the company received a monetary compensation as part of
this transaction and the company uses the proceeds to fund part of its capital
expenditures program.
EPM's ratings reflect the company's low business risk resulting from its
business diversification and characteristics as a utility service provider. EPM
provides electricity, water and sewage water, natural gas distribution services
as well as electric generation and telecommunication services. The company's
ratings also reflect its solid credit protection measures supported by low
leverage, healthy interest coverage and strong liquidity position. EPM's ratings
also reflect the company's somewhat aggressive growth strategy as well as the
company's exposure to regulatory risk, which is considered moderate.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'National Ratings - Methodology Update' (Jan. 19, 2011).
Applicable Criteria and Related Research:
Corporate Rating Methodology
National Ratings Criteria

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